♪ >> i'm not rise also -- not surprised also to hear the language of fed chair jay powell. they are committed to going at this gradually. >> what they don't want to do is take dramatic and drastic action that really results in a sharp shift. >> there's really no cliff out there that we see right now. >> of course the economy is experiencing some friction. we rebooted the global economy. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. tom keene is out of the building. alongside may, lisa -- alongside may, lisa abramowicz and taylor riggs. sterling comes in a little bit, now negative on the day, with a bank of england rate decision.

lisa abramowicz which is the detail you see right now? lisa: no drama. there was no rate decision. they voted unanimously to maintain edge market interest rates. basically, no change. no indication of tightening. we will have to parse through the details to see if there was a more -- was any more hawkish decision. people will way this -- will weigh this as them being asked of us they can be. jonathan: voting to reduce the asset purchase target, right now 875 billion in its entirety. sterling down to 1.3942. all-time highs on the cards may be the s&p 500. taylor: certainly an interesting day. the resiliency of these markets

to shrug off some of the inflationary, more hawkish tones we get. rafael bostick really striking that tone, hinting that he's looking at a paper in three to four months. that sets us up nicely for jackson hole september, and maybe some of the divergence or not between the individual central banks as equity markets say we are in it and we are going higher. jonathan: everyone else just shrugs their shoulders. the bank of england right now, we will not tighten until there is clear evidence of progress towards our goal. 1.3928 on sterling now against the u.s. dollar. lisa: however, everyone seems to be saying this as we end up heading towards some sort of recovery. that said, the balance of the decision-making at this point is to the more dovish side. i think that is clear from each central meeting we hear. it will have to be fed chair jay powell that changes it. jonathan: on this be 500, equity

futures drifting higher. we advanced zero point -- on the s&p 500, equity futures drifting higher. we advanced 0.5%. euro-dollar, $1.1941. basically unchanged at the 10 year at 1.4868 sent. -- 1.48 68 percent. unchanged after the surprise of the last week. taylor: this is telling because the fact that you have -- lisa: this is telling because the fact that you have all of these fed officials saying inflationary pressures could be significant, that that you are not getting moves today is significant. the bank of england coming out and saying the t word, transitory, when it comes to inflationary pressures. if we had such a robust recovery , such a tight labor market, why is it that we are still getting nearly 400,000 americans filing for unemployment benefits each week? today we are expecting less than

400,000 for the first time since the peak of the pandemic. however, still a high of 380,000. the question i have is how much progress is being made. how can we dismiss these data points as just noisy versus actually telling in terms of the composition of which jobs are coming back? also getting first quarter gdp comedy third read of that -- first quarter gdp, the third read of that. yesterday's five-year sale went pretty well. at 4:30, the federal relief results of the stress tests. all of the banks are expected to pass with flying colors. expected to double that for dividend payments and market buybacks. basically, is a big and -- is it baked in, or do people see this as a point of profitability going forward? have banks become the new

utilities in terms of generating cash and being the reliable bet rather than a cyclical one that functions on trading volumes? jonathan: let's turn to luke kawa, ubs asset allocation strategist. good to see you. good old friend. central banks, when they change, they take a b steps. the baby steps we are witnessing over the past week with the federal reserve and now the bank of england seem to be reassessing the balance of risk around the outlook, and also around the outlook for inflation or get what is your take on that? luke: imagine if your baby's first step wasn't a first step, but a polevault or a high jump. that is the kind of shocked the market had to do with, even though we are talking about things into 2023 and a lot of progress to be sustained until we actually realize. looking at the fed digesting how that might take process at action, what we are thinking about is the two reasons why chairman powell said that the dots did move up.

one reason is that economic activity is coming in, so there's more confidence within the fed that the baseline that they achieved, that they outlined in march, is going to be achieved. it suggests that continued data, that that outlook is going to be achieved. you're going to continue to push the timeline on that front. on the other hand, it is clear that the balance of inflation risks, the 13 fed officials thinking the risks to core pce are tilted to the upside, that also influences the balance of risk and when they think tightening might be warranted. you have what we would expect to see over time, that the editing of these inflation asked the ebbing -- the ebbing of these inflationary risks turn out to

be less persistent inflationary forces. putting this together, i think what you would expect coming out of the fomc, and this is something we have adjusted to take account of, is that real yield breakevens has moved into the real yields side of driving moves in the 10 year. that of course is going to have an effect on the dollar, so it is about seeing less widespread dollar weakness, and the scope for that deteriorating on the margin. what i will say is encouraging from a risk perspective is that even as we've had a broad dollar rebound in the wake of the fomc, it is rallying more against the dxy components then it is against the ethics components, so this -- the fx components. so this is just a reevaluation of the fed, real yields, and what that means at the front end. lisa: the more we hear transitory, the more people by risk assets -- people buy risk assets. there's a question at which point the federal reserve and

other central banks start to take action to curtail some of the moves we have seen. i am thinking of the mortgage market in particular. to taylor 's point earlier -- to taylor's point earlier, how much are you looking to the mortgage market to feel some pain from that as people start to question the elevated housing prices? luke: i think the main reason why the fed at this point is still purchasing in both asset classes is because it is sucking treasury vol out of the market, and one of the fed's goals is to use asset purchases to a certain extent to calm market volatility. so i think the signal from the fed that it is going in either direction in terms of purchasing less and moving to raise rates at some inconclusive point in the future is really just a signal that the fed is moving more from a vol suppressant mode

in order to get us through the crisis and get the rebound completely on track to one where the fed is going to be more a source of two-way volatility. i think that is the real reason, not necessarily the underlying components of the asset purchases. taylor: are you surprised by the cross asset resiliency with equities at record highs, the vix with a 15 handle, and a very calm and well-behaved bond market? luke: to a certain extent, yes. i think the markets have been able to digest this quite well. a more hawkish than expected fed. when we are looking for what and why, what we talked about in terms of the dollar being stronger, real yields being stronger, how strong cannot filter out? that hasn't filtered out all the way to commodities. copper had a pretty bad move down, but that has kind of alleviated lately. oil is pushing to new highs. market is still trading this idea that we are getting very good activity going forward.

the fed has cut off table inflation outcomes. therefore it is safe to buy equities. in our view, there are limits to this, particularly the way it has been playing under the surface with the rotation to growth. that is not necessarily something we want to chase right now. right now equities at the headline level, if you look over the past few months, equities will probably move sideways on a global basis, and on the s&p 500, so we are not us there really -- not necessarily looking for a lot of downside. this is just to do with the market needing to digest that the second derivative is turning in the fed is becoming less supportive. jonathan: always good to catch up. has euro got a call on 2020? luke: i have to say the swiss, right? lisa: you? jonathan: i guess.

ubs. that's the house view. you've got to go with switzerland. ubs asset allocation strategist luke kawa. luke has become so corporate. lisa: he would never say the new york team. jonathan: just pick a side. lisa: is that long hair corporate? jonathan: not sure, to be honest with you. used to be very strict over at ubs, but you could wear, what you couldn't wear. going to go from a headline at the bank of england. this is how you say goodbye to your consenting chief economist. -- your dissenting chief economist. lisa: saying goodbye to the last dissenter. i think a lot of people thought he was a little bi the fringe. that said, actually healthy to have that fringe kno. jonathan: andy haldane goes over to a think tank now and writes some provocative pieces.

gets you thinking. coming up, peter tchir, academy securities. looking forward to that conversation about 50 minutes from now. on the s&p, 4253, up almost 0.5%. heard on bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ♪ ritika: with the first word news, i'm ritika gupta. u.s. officials are confirming that details of the genetic makeup of -- were removed from a chinese database. the u.s. national institutes of health says that data first admitted to the u.s. archiving march 2020 were requested to be withdrawn by the same researcher three months later. the vietnamese government plans to administer 300,000 to 500,000 covid-19 vaccinations a day in the next six months, according

to a post on the government website. the ministries of health and defense are set to be close -- are said to be close to completing warehouses capable of storing vaccines at extremely cold temperatures across the country. a bullish cryptic currency exchange backed by a group of billionaires is inspect merger talks -- is in spac merger talks. an agreement is possible in the next few weeks. the final valuation could change based on the price of bitcoin. john mcafee has been found dead in a spanish prison cell shortly after it was announced he would be extradited to the u.s. to face charges of financial crimes. the creator of the mcafee antivirus software had been jailed in spain on u.s. tax evasion charges. a spanish newspaper has reported that he appeared to have taken his own life. he was 75 years old. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more

than 120 countries. i'm ritika gupta. this is bloomberg. ♪

♪ >> i'm not surprised also to hear the language of fed chair jay powell that they are

committed to going at this gradually. the real employment rate -- the real unemployment rate is still elevated. this is going to be a gradual process. jonathan: that was brian levitt, the invesco global market strategist. tom keene out of the building. with me, lisa abramowicz, taylor riggs. i'm jonathan ferro. on the s&p 500 we advanced 0.5%. yields unchanged at 1.4951% on the u.s. 10 year -- at 1.4851% on the 10 year yield. lisa: i think the fed is going to have to move first. that is the message we are getting from central bank after central bank. at what point is this just a race to the bottom, even as we see inflation pickup? jonathan: do you are number the

race in 2014 between the bank of england and the federal reserve, who would hike first? we are waiting a number of years may be for even the fed to make that move. lisa: the indication of who will move the purchases is first. what did luke kawa say? jonathan: i counted the baby step, and he said imagine if your baby's first move is a somersault or something like that. josh wingrove joining us now, bloomberg white house reporter in d.c. always good to catch up. let's start with following the infrastructure talks. i've been told it is days and not weeks, otherwise we are going it alone. i was told the same thing three weeks after i left the building. what is going on? josh: they have seemed to reach the cusp of a deal last night, several senators calling it a framework, others saying we are not quite there yet, but they did get a meeting with biden today at the white house. the white house said they wouldn't do that unless there was progress.

the top line numbers kind of depend on who you ask right now, but it looks like something around the order of $559 billion in new spending get theirs way they can stretch the timeline, including stuff that would have been spent anyway and call it over $1 trillion and call it a win. democrats are saying the reconciliation process is part of this process, that stuff they did not get can maybe be rolled into reconciliation. this is sort of like letting the least popular person at the table order the appetizers because you know you still get to order the main course. lisa: that's what i was going to go to. isn't this a loss for the democrats, giving republicans the upper hands from $1.9 trillion to $1.2 trillion to now $559 billion, continuing to ratchet down the prospect -- ratchet down while the prospects of further plans getting pass ed kind of wane? josh: reconciliation, for those

of the same viewers who are not following the senate parliament ray procedure, there's a lot of big question marks on it. we don't know what all 50 democrats in the senate will support. we don't know what can go into reconciliation. it is always sort of up in the air. you recall the $15 minimum wage, when they realized that would be out of bounds. democrats have this sort of second bullet to fire, if you will, but they don't know yet what they can put in it. remember, there's a third plan is well, the families plan. they want to do all of that for reconciliation. that might go to the fall. there's a lot of moving parts right now, but biden is trying to have this smaller deal that republicans can support. incidentally, just because 10 republicans support it doesn't mean 50 senators do. trying to get some thing on

reconciliation that progressives don't lose their mind and accuse them of selling out to the republicans. lisa: one reason why it is always great to speak with you is because you walk through the halls of capitol hill and find out where the balance of energy is. is it all in infrastructure, basically that the pandemic is over and no one is talking about it, even though in the rest of the world, there's a lot of cases and concern about getting vaccinations? josh: i mean, yeah. the pandemic has definitely gone down the list. one thing we are going to see joe biden do today is go to north carolina to try two people -- tried to beg people to get shots. there are higher vaccination rates in some states, and stark contrast to lower vaccination rates in other states, in particular through the u.s. south. that delta variant is starting to spread, and biden is kind of torn on his messaging. he wants to do this july 4 celebration up the white house. they are going to have 1000

people, independence day from the virus. the betting on where you live in the u.s., it is very much over or very much not. folks in areas where it is not over i most likely to not be getting the vaccine, so biden wants to talk about reopening, talks about all of the shots they have given in the u.s. it is a staggering number compared to a few months ago, but my gosh, this thing is still roiling out there, and particular that delta variant. taylor: forgive me if i circle back to the infrastructure conversation as we try to round this conversation out. how are we thinking at this moment of defining what infrastructure is and what it isn't? josh: it is difficult getting more to brick-and-mortar. this is sort of the early discussion. joe biden takes a broader view of it. they think anything that facilitates people entering the workforce would be considered infrastructure, including things

like the caregiving economy. some of that did get pushed into the third bill, which means it wasn't necessarily on the table for these conversations. what we are talking about now is a little more what you might call core infrastructure. again, $550 billion over a shorter timeframe. they will probably call it $1 trillion over 10 years. there's consensus that this is needed, but we will see. one of the changes they have made is to bring money from covid aid around telecoms to add more infrastructure spending to the pot. jonathan: josh wingrove, thank you. annmarie hordern joining the team in d.c. that is a big dose of new york and washington. you'll be ok. josh wingrove looking a little bit worried about how much new york has just gone down to d.c. lisa: oh come on.

we are not that bad. jonathan: using they can take that? -- do you think they can take that? lisa: of course they can. do you think they are lightweights in washington, d.c. ? jonathan: compare to up here, don't you? lisa: i mean, i think it is a different kind of gloves coming off in washington, d.c. than here. jonathan: looking up at 8:30 compared to getting up at 6:00. it is a different world. taylor: i am still trying to recall the governor replaced with a movie star, you guys. lisa: i think new york is tough, but there's a soft underneath that. jonathan: we will take your word for it. we will catch up with peter tchir on what it means for new york in the markets on wall street. we need to catch up with bill dudley, the former new york fed president. looking forward to that. equity futures up 21 on the s&p, 4252, up 0.5%.

yields unchanged, 1.4868%. i'm with new york. lisa: oh yeah. jonathan: i'm very much new york. lisa: i let help -- you love how clean the streets are. jonathan: you know i love new york. don't even try to frame it that way. this is bloomberg. michael: welcome home -- lisa: welcome home. ♪

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♪ jonathan: from new york city live on tv and radio, for our audience worldwide, here is the price action this thursday morning. about an hour away from jobless claims in america. on the nasdaq we advance almost 0.6%. just away from an all-time high, a couple of inches away, 40 to 57 is the intraday all-time high on the s&p 500 -- 4257 is the intraday all-time high on the s&p 500. a summer thursday feel to a bond market with yields pretty much unchanged. your 10 year, 1.4885%. let's get to something that has changed in the last 30 minutes, the shape of sterling, cable,

the pound against the u.s. dollar. the pound right now, $1.3918. if you are positioned for a hawkish surprise, maybe you got a surprise. it is bye-bye to the chief economist at the bank of england andy haldane. he dissents, he wants to reduce the size of the asset purchase program. the pound right now, 1.3 914 -- right now, $1.3914. now here's taylor riggs. taylor: in terms of the money sloshing around in the system, i'm taking a look at clover health. i'm also taking a look at some of the other meme stocks, sundial and torchlight energy, which we cannot stop talking about given the wild swings we continue to see. stories out this morning that fundamental managers who sold him stop, maybe some of them are regretting it giving the massive run-up we continue to see.

those are shares we continue to follow. let's take a look at some of the other fundamental stories. we have to talk about the reopening and mgm, where we are with that. tesla is also a fundamental story here. a lot of competition from porsche, audi, mercedes making an aggressive push in the ev space. the fed stress test for the big banks, what does it mean for some of the regional players, given the massive underperformance we have seen in june that reverses this morning, as we are up 0.6%? and can we talk about beyond meat? i have very interesting comments on this. dunkin' said they are still selling some of the breakfast sausages. jp morgan said their tech said they were not the beyond meat breakfast sausages. jonathan: so we are struggling to track whether they are still selling the beyond meat breakfast sausage? lisa: yes, and there's also a

taco bell plant-based thing going on. it is a very delicate debate. jonathan: lovely. do you we talk about? -- do you eat talk about? -- do you eat taco bell? taylor: i do. lisa: so does jon. i often see you there. [laughter] jonathan: no i don't. joining us is bill dudley, princeton university research scholar and former new york fed president. it is good to catch up with you. i enjoy your pieces, and your piece this morning is a little technical, but i want you to run through things. when the bank of england comes out with a rate decision, it means a lot in the u.k. for business loans, for mortgages. the fed funds rate is a different east. you push back against the continued use of targeting the fed funds rate and using it, can you walk us through the thinking here? william: it used to be important because reserves in the banking system are quite scarce, so banks had to trade federal funds between themselves to satisfy

reserve requirements. that is not the situation today. the banking system is awash in reserves as the federal reserve continues to buy $120 billion of treasuries and mortgage backed securities. so the market has become very different, much smaller and much more idiosyncratic than in the past. the motivation for this piece was the fact that the fed last week had to make a technical adjustment to short-term interest rates, five basis points each. why? to supposedly keep the federal funds rate closer to the midpoint range. why are we targeting the federal funds rate at this point in the first place? the fed has the ability to just pay the interest on reserves. why not it's the federal funds rate target and set the interest rate at reserves at a level appropriate with what the fed seeks to accomplish? jonathan: that is your simple solution. in three words, drop the target. do you anticipate a

communication issue if they were to do that this year? william: i think they could explain it very easily. they would no longer have to make these technical just once that i think are more confusing than illuminating. also, another thing they need to do is exempt reserves from the leverage ratio. they are putting downward pressure on rates. the whole reason they had to make this technical adjustment to push the federal funds rate up was the fact that they are flooding the banking system with reserves. thanks don't want the reserves because of the leverage ratio which is starting to bind the capital requirement for banks. if you remove the leverage ratio, that problem goes away as well. lisa: you're talking about the glut of deposits you are seeing on some of the banks' books, with some saying to corporate clients we don't even want your money because it is getting to be excessive. just taking a step back, how much is the change you are proposing evidence that we are going to remain in this environment with a system awash in cash, and the federal reserve

pumping up money continually into it even that there is so much cash? how much is it an intelligent of that reality over the near and frankly that near-term -- frankly not that near-term? william: first of all, the fed is not going to stop their asset purchases quickly. they are going to continue well into the fall, so the bank balances are going to continue to grow. when it finally decides to start to normalize its down the street, the balance sheet is so big now it is going to take a long time to get it back to the $1.5 trillion of excess reserves we had prior to the pandemic. i think the interest rate the fed pays on reserves is a primary tool of monetary policy. lisa: i understand the argument that the fed wants to continue with their very easy money policies to simply allow inflation to pick up and allow employment to get to a better place. however, people have pointed to frothy her -- plenty to frothier areas in the market.

be think it would harm the progress for them to allow a pair back to the purchases they make every month? william: i think it would have an effect more on expectations about future logic. the fed has now acknowledged that they have made substantial further progress to their goals, so people would change their expectations of the timing of tightening. i don't think it would be that important in the narrowness of the housing market. i think it would be quite important as a signal of monetary policy and the timing of tightening. taylor: is that the preferred method? william: i don't think they are going to do it. i think they are going to be pretty patient. taylor: what about more of an equal weighting taper, a la december 2013, and the discussion a $5 billion in treasuries, $5 billion in mbs? is that more of an easy policy to go? william: you have a template from the last cycle, so to deviate from that template you have to have a good reason.

i don't think they have a really good reason. it just raises a bunch of questions. what are you concerned about? jonathan: what did we learn from last time around, the lessons of the last time we reduced asset purchases and eventually had some balance sheet reductions several years later? william: i think it went quite smoothly once the fed communicated clearly about what the sequence was going to be. first we stopped the asset purchases. we can taper the asset purchases down. then we start to normalize the size of the balance sheet. this time the market has a template to look at. last time they didn't, so there is a lot more uncertainty about what the fed was going to do in the last cycle compared to this cycle. i think it is one reason why the markets are pretty comfortable with what the fed is up to. lisa: do you think there is too much fed speak at this point? there basically is a fed official every hour speaking. william: there's always probably too much fed speak. the thing to pay attention to is

the chairman, the vice chairman of the board of governors, and the vice chairman of the markets committee. so powell, clarida, and williams. jonathan: are you saying ignore the fed presidents when they go around doing speeches? william: i'm not saying ignore the fed presidents, but put a lot less weight on them because they are just one memorable committee. the committee is not going to not do some thing if three people are not on board. don't put too much weight on what one individual president might say. jonathan: what is the conversation inside the federal reserve when you have the likes of fish are really pushing back at the turn of the last crisis going through the recovery? just how much do they influence the conversation? william: they influence the conversation because they offer a different perspective, and i think the diversity of views is important. a diversity of backgrounds is actually important in terms of good policymaking. but at the end of the day, if

someone is dissenting, they marginalize themselves because they are not relevant in terms of figuring out where the committee is going to go in the future. right now there's a lot of disagreement about when we can start to taper asset purchases because people are uncertain about the state of the recovery and how fast will it cut into unused labor resources. there's quite a bit of disagreement right now about the timing. but the people that matter are williams, clarida, and of course, powell, because they will determine the ultimate timing. jonathan: bill, good to catch up, as always. bill dudley, bloomberg opinion columnist and former new york fed president. just a little bit of insight into the inner workings of the federal reserve. lisa: this is the reason why markets are shrugging off some of the more hawkish dots from last week's fed meeting. people are saying that was not fed chair powell, that was not john williams, it wasn't rich clarida, so we don't have to pay

attention to those dots. what is the purpose of all of these regional fed presidents coming out and having a more hawkish tilt, warning about froth, warning about potential upside surprises to inflation, if everyone just ignores them anyway? basically, if it is going to be fed chair powell and nobody else? jonathan: i think some healthy dissent is important. are we getting that now from this federal reserve? i remover one interview with jim bullard in the last couple of months when he almost said he was waiting for chairman powell to start the conversation about tapering. they are waiting for the chairman to almost queue what they can and can't talk about -- almost cue what they can and can't talk about. lisa: the idea here that markets get very concerned about any hawkish tilt, the fact that there was that sort of flattening in the yield curve does get people's attention, but still, is this what counts as dissent? jonathan: i don't know. you've spent the last couple of years talking about this new framework. your hands are tied to some

degree. maybe that is why this defensive, more hawkish stance is more muted than it otherwise has been. i have to say it has got louder and the last couple of weeks. bostick, bullard, kaplan again and again. the s&p advancing 0.5%. lisa abramowicz, taylor riggs, jonathan ferro. tom keene back on monday. this is bloomberg. ♪ ritika: with the first word news , i'm ritika gupta. president biden is traveling to north carolina today to encourage more americans to get the covid-19 vaccine. his trip to raleigh comes 10 days before july 4. the president's stated target date to see at least 70 proper sent -- at least 75% of americans vaccinated. the chinese defense ministry says exercises by the people's liberation army aircraft in the taiwan strait are a necessary

response to a regional security situation. there was no elaboration. during a briefing in beijing, a defense spokesman urged the u.s. and other countries to abort what he called a cold war mentality and avoid military threat. sydney is were ejecting calls from health experts to interlock down to control an outbreak of the delta strain, the strain first identified in india, despite case numbers almost doubling to 31 over the past two days alone. the world's biggest maker of bitcoin mining rigs is suspending sales of machines for spot delivery, hoping to prop up the prices. it says it stopped selling new equipment after prices for top-tier rigs plunged by about 75% since april. china's crackdown on crypto mining causing minors to abandon -- causing miners to abandon

their equipment. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am. this is bloomberg. ♪

>> the conversation about crypto is a minor percent of any

dialogue we have with any company worldwide. it is just not terribly important. could crypto become a really important asset class one day? sure, if there was a digital dollar, a true digital yuan. that would be much more impactful than any other crypto. jonathan: larry fink, the blackrock chairman and ceo. from new york city this morning, good morning. alongside lisa abramowicz and taylor riggs, i'm jonathan ferro. tom keene out of the building. equity futures, 40 to 51, up 20 on the s&p. we advance 0.5% -- 4251, up 20 on the s&p. we advance 0.5%. business confidence out of europe this morning. french business confidence, german business confidence. in the bond market, yields 1.488 high percent on the 10 year -- 1.4885% on the 10 year, unchanged.

if i was to tell you 12 months ago this is where we would be with u.k. travel, even with these kind of numbers out of the u.k., the prime minister speaking this morning, 83% of adults receiving at least one covid vaccination shot, and we have an opportunity to open up travel through the double jab. i am just surprised we are not there yet. lisa: and please like israel, which has one of the highest vaccination totals out there, is closing their borders even longer because of an increase in the delta variant, even though hospitalizations have not picked up all that much. it just talks to the fear that people have of covid, that perhaps goes beyond what we are seeing in the hospital system. jonathan: the airline business right now is really tough for international travel. we have talked about that a million times over the last couple of months. domestic travel was supposed to

be the support for the likes of american airlines. american airlines has been aggressive about putting capacity back on, and we have seen it continuously. american airlines has had to cancel flights because they can't get the staff. taylor: we spoke with the southwest ceo on "the close" yesterday, and i brought up american, delta trying to scramble to hire pilots. he literally says they can't bring workers back fast enough. some of this is not just the airline industry. this is a broad u.s., global issue, of a later sure bridge -- of a labor shortage. but it really speaks to the travel industry specifically, about how quickly demand came back. perhaps maybe we were caught off guard, the everything i read said this was going to be the roaring 20 20's -- throwing 20 -- the roaring 2020's, brace yourself.

jonathan: my question is when do we resolve them. when do we start to see real signs of them being resolved? is that through august, september, maybe later? lisa: we have the same kind of tone out of fed chair jay powell, the uncertainty, as tom says they are making it up because we don't even understand why there is this friction in the labor market. do you buy this idea that it is childcare? do you buy that it is a skills mismatch? or do you buy that it is because people are getting enhanced unemployment benefits and want to stay home? i think the evidence is really unclear what the main driver is. probably a little of all -- a little bit of all. jonathan: september is when the kids go back to school. that is when we find out. taylor: all i know is my cauliflower rice chip outlay is up 5% because they have to pass on the costs -- rice at chipotle is up 5% because they have to pass on the costs. if it is transitory, they wouldn't be passing on permanent price increases. jonathan: that's not the

definition of transitory. that is a one-off change in the price level. persistent would be if that were to happen again and again and again. if this is a one-off change in the price level, or the beginning of something persistent. lisa: it is a rate of change question. speaking to that, there is a story on the bloomberg today about used car prices and how they are poised to decelerate. they will still be increasing, but not at some of the same pace as the supply chain kinks get worked out. that would seem to confirm the transitory idea. jonathan: 4252 on the s&p 500. getting close to all-time highs. it is growth versus value, value versus tech. take your pick. let's bring in dave wilson for more with his chart of the day. run us through it. dave: what we are talking about here is correlation between the s&p 500 your growth and pure value indexes. you are talking about a subset of a broader s&p 500, specifically companies that best fit into these growth and value categories.

we have certainly seen some back and forth over the past year or so. value stocks end up taking the lead for a while as we got back from the lows of march of last year, and more recently in the past month or so, and has been a bit of a shift towards growth. what you get out of that is that the correlation just isn't there the way it has been historically. in fact, you are looking at the lowest level since october 2000 in terms of the relationship between these pure gross and pure value indexes -- pure growth and pure value indexes, so it really does matter more than it has for 20 years which way you go when it comes to the growth versus value argument. that really plays out when you look at, say, the past three years. you've got to try the pure growth and pure value track each other until last year, and then things start going there own way. lisa: what is the why behind this?

is it the idea that fund managers come on and say it is time to be a stock picker? is this the idea that the rotation under the hood of the equity indexes has been abnormally significant? dave: perhaps more the rotation because you have to go back more than a decade to really see the last time that value stocks led the way, and arguably more recently, that has been flipped on its head a bit. we have seen a return to the growth. still, value is one of the best performers on the year if you look at various factors that people pay attention to when it comes to investing. that said, with the turnaround we have seen more lately, you kind of get value and gross each going their own way as opposed to moving together, which has been the tendency over time. jonathan: dave, good to catch up. we will catch up later on about

clinging onto that idea of the cyclicals can outperform from here, and also we need to talk about the fiscal plan in d.c. come or the lack thereof. peter tchir saying much of what is driving the market can be linked to doubt about the size and effectiveness of fiscal stimulus. peter will do nothing about five minutes. lisa: when i ask about this, people say is not priced in. if this is disappointment, then it has been priced in, and if it is not priced in, are we taking the tax hikes off the table, which could also be a potential downside risk to stocks? jonathan: so it is bullish or bearish. which one is it? lisa: i am going to be consistent, true to form. jonathan: i am not shocked. nobody is. [laughter] lisa: you've got the fiscal stimulus on one side, and on the flipside, people say they have priced in a potential negative drag from higher taxes, so actually, it could be able to surprise. look at that. jonathan: thank you, i think. the wonderful lisa abramowicz, taylor riggs, jonathan ferro.

tk is back with on -- back with us on monday. we are up 0.5% on isn't the. -- on the s&p. for our audience worldwide, this is bloomberg. ♪

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♪ >> the bump in the road is -- i am not surprised to hear the language of fed chair jay powell. they're committed to going at this gradually. >> what they don't want to do is take dramatic and drastic action. >> what they have said is that we will respond if we need to, but there ain't no inflation problem.